Clinical islet transplantation has provided proof-of-principle that re-establishment of an adequate β-cell mass restores euglycemia in patients with insulin-dependent diabetes. A significant shortage in the number of donor pancreas available for transplantation has led to the exploration of alternative sources of insulin-producing cells. These include primary β-cell derived progenitors, ES cells, bone marrow-derived mesenchymal cells (BMCs), liver cells, adipose tissue derived stem cells or non-endocrine pancreatic cells. Bone marrow derived stem cells have an added advantage as they can be used in autologous / allogeneic transplantation procedures. Bone marrow (BM) contains hematopoietic and mesenchymal stem cells, which exhibit considerable developmental plasticity. Mesenchymal stem cells (MSCs) selectively adhere to plastic surfaces and are defined as self-renewing cells capable of differentiating into multiple cell types, including osteocytes, chondrocytes, adipocytes, hepatocytes, myocytes, neurons, and cardiomyocytes. More recently, cultured MSCs were found to secrete various bioactive molecules that display anti-apoptotic, immunomodulatory, angiogenic, antiscarring, and chemoattractant properties, providing a basis for their use as tools to create local regenerative environment in vivo. MSCs possess remarkable expansion potential in culture and are highly amenable to genetic modification with various viral vectors, rendering them optimal vehicles for cell-based therapies. Most importantly, MSC plasticity and the possibility to use them as autologous cells render MSCs suitable for cell therapy and tissue engineering. Various reports have pointed out the role of bone marrow stem cells in pancreatic regeneration. Although there are controversies in the mechanism of action in inducing= pancreatic regeneration in experimental diabetic animals, it is generally agreed that bone marrow derived stem cells play a major role in pancreatic regeneration in diabetes.